Singapore household debt drops to decade-low as high interest rates deter borrowing

Great news on the money front. For the past eight quarters, we’ve been chipping away at our debts, and now, our household debt is down to just 1.2 times our disposable income. That’s the lowest it’s been in over 10 years!

The MAS just let us in on this in their latest report, and it’s pretty impressive.

So, what’s behind this awesome trend?

First, interest rates have been climbing. Remember when borrowing money was super cheap back in early 2022?

Well, times have changed. The rate we often use to price loans, like our home mortgages, has jumped from under 0.5 per cent to over 3.5 per cent in the second half of 2023.

That’s a big leap, and it’s made us think twice about taking on new loans.

The second hero in this story?

Our incomes are growing, and we’re saving more.

This one-two punch means we’re better at handling our debts and keeping those scary non-performing loans (the ones we struggle to pay back) really low.

MAS did some stress testing, basically seeing how we’d do if the economy got rough.

The good news? Most of us can handle our home loan payments, even if things get a bit tougher.

But, a heads-up: There are still some folks with a lot of debt who might find it hard to keep up.

MAS’ advice? Stay smart with your money, especially since wage increases might slow down soon.

They’re saying, “Keep those savings handy, just in case!”

And how about our houses?

Well, home loans are growing, but at a slow pace.

We’re paying off our mortgages and not rushing to get new ones.

This careful approach, along with some smart rules from MAS, means we’re in a good spot if property values dip.

One area to watch out for?

Our credit card debt. It’s going up, mostly because we’re travelling more and shopping a bit more.

It’s still not at a worrying level, but let’s keep an eye on those credit card bills, alright?

Wrapping it up, our household wealth is looking pretty good.

It’s up by 7.6 per cent to a whopping $2.7 trillion, thanks to our savings and the value of our homes.

Even though we’re spending a bit more these days, our savings are still outpacing our debts.

So, there you have it. We’re doing great at managing our money.

Let’s keep up the good work and stay prepared for whatever comes our way.